Saturday, March 18, 2017

This is fake news about the news. Sad!

Dear Editor & Publisher,

Your article “The Canadian Newspaper Industry is Getting a New Jolt of Life” (March 6) was well written by H.G. Watson, but its presentation on your
pages was misleading in several ways, starting with the headline. After
reciting the litany of woes that have beset the industry over the past decade or so, Ms. Watson mentioned a few digital initiatives that are attempting to help
fill the growing news gap in Canada.
These hardly qualify as the “jolt of life” somehow seen by your headline
writer. The accompanying graphic was even more misleading, claiming that 171
local news outlets have closed in Canada
since 2008. This does not jibe with data gathered scrupulously by Newspapers
Canada, which actually show an increase over the past five years. It does, however, fit in well with the rampant myth-making I found in
researching my 2014 book Greatly Exaggerated: The Myth of the Death of Newspapers. (PDF | reviews)

As mentioned in your article, the Canadian newspaper industry
suffered less severely during the Great Recession than in the U.S.
That was because the economy north of the border did not decline as steeply due to more
sensible banking regulations. Only one daily was
closed, but
it was immediately reincarnated as a local version of the free
commuter tabloid Metro. By my count, eight daily newspapers have been closed in
Canada since 2010
(seven others have moved to non-daily publication), but the vast majority of
the closures have occurred under questionable circumstances that warrant
federal investigation. The largest newspaper closed was the Guelph Mercury, which
ranked about 50th in circulation among Canada’s
then 90-odd paid dailies. The others were among Canada’s
smallest. Six were closed and three were rendered non-dailies by
two chains in the far western province
of British Columbia that have been buying, selling, and even trading newspapers back and forth since 2010, then often closing them to eliminate competition. By my
count, Black Press and Glacier Media have closed 19 of the newspapers they have
exchanged, including non-dailies. More than half of the 15 newspapers the
chains traded in one 2014 deal were subsequently shuttered, creating numerous local monopolies. The federal Competition Bureau seems not to have noticed. The chains have claimed that some of the closed
titles were unprofitable, but financial statements filed by Glacier Media,
which is publicly traded, show that it recorded a profit margin for the first
nine months of 2016 in excess of 30 percent. Black Press is privately owned and is thus not required to disclose its
finances, but it is partly owned by publicly-traded Torstar Corp., whose annual
reports show that between 2011 and 2015 Black Press recorded earnings ranging from $15 million to $28 million, peaking in 2013. As for non-daily
newspapers, according to Newspapers Canada data,
there were 1,060 in Canada
last year, or 18 more than in 2011.

As I show in Greatly Exaggerated, no publicly-traded
newspaper company in North America suffered an annual loss on an operating
basis between 2006 and 2013, a period which included the greatest-ever decline
in newspaper advertising revenues, a stupefying drop of about half in the U.S.
and a quarter in Canada. Most newspaper companies emerged from the recession
making double-digit profit margins. Some barely dipped below 20 percent return
on revenue. Even the dozen or so chains that declared bankruptcy during
this period were profitable, some enviably so. Their problem was the enormous
debt they had taken on in making acquisitions, which could not be serviced with
their reduced revenues. Their newspapers were profitable. The debt-laden chains
were not.

Hayley Watson poignantly asks in her article “What the hell
happened to the Canadian newspaper industry?” The answer is simple – unhindered
corporate financial engineering and inexcusable federal regulatory failure. My
2016 book The News We Deserve: The Transformation of Canada’s Media Landscape (PDF | reviews), chronicles how Canada’s largest
newspaper company, Canwest Publications, was taken over following its 2009
bankruptcy by U.S. hedge funds despite a supposed limit on foreign ownership of
25 percent. The hedge funds bought up a large portion of Canwest’s massive debt
at pennies on the dollar, then used part of it in making a so-called “credit
bid” that won the company at auction. The real stroke of financial engineering
genius came when the hedge funds kept the rest of this high-interest debt on
the company’s books, meaning that the renamed Postmedia Network had to pay them
first every month. As a result, of the $82 million in operating earnings
Postmedia recorded in its most recent fiscal year (on revenues of $877 million, for a profit margin of 9.3 percent), it was
forced to make $72 million in payments on debt bizarrely held mostly by its foreign
owners. The result has been non-stop cost cutting to service this debt as
Postmedia revenues fall.

But wait, it gets worse. The hedge funds doubled down in
2014, buying 175 of the 178 dailies owned by Canada’s
second-largest newspaper chain, Sun Media. That gave it both dailies in three
more cities – Ottawa, Calgary
and Edmonton – in addition to Vancouver,
where it already owned both. It promised it wouldn’t merge the newsrooms in
those cities and the acquisition was approved by the Competition Bureau. By my count, that gave Postmedia 37.6 percent
of paid daily circulation nationwide, and 75.4 percent in the three westernmost
provinces, where it owns eight of the nine largest dailies. Despite its
promises, in early 2016 Postmedia merged the newsrooms of its dual dailies in
Ottawa, Edmonton, Calgary, and even Vancouver, where its corporate progenitor promised the Competition Bureau’s predecessor more than a half century ago
that would never happen.

That’s when I decided to try and do something about this
instead of simply researching and writing about it, as I have for the past 20
years. I presented some of the above facts to Dr. Hedy Fry, who is the
longest-serving Member of Parliament in the federal Liberal government that was
elected in late 2015 following almost a decade of Conservative rule. Hearings
were convened in Ottawa by a Heritage ministry committee on Media and Local Communities several
weeks later and have been ongoing for more than a year. A report by a think tank was commissioned, but it ignored the problems of ownership concentration and foreign ownership, instead laying most of the blame for Canada's local news disaster on the U.S. online giants Facebook and Google, which it suggested taxing to subsidize shrinking news outlets. It similarly promoted the newspaper death myth and was accused of "goosing the numbers" in doing so. The committee's recommendations to alleviate the ever-worsening journalism crisis
in Canada are expected by spring.

A real jolt of life is badly needed for Canada’s
decimated news media. It will hopefully come soon. In the meantime, can we please stick to the facts about what is undeniably a crisis and paint a picture that better conforms to reality?